11 June 2014 1

WP3 - Insurance Mapping Update & Recommendations

By Thomas Dunand, Hannover Re

Forum Meeting 6, DG ENTR, Brussels

11 June 2014 2

Schedule M

1 M2

M3

M4

M5

M6

M7

M8

M9

M10

M11

M12

M13

M14

M15

M16

M17

M18

M19

M20

M21

M22

M23

M24

M25

M26

M27

M28

M29

M30

M31

M32

M33

M34

M35

M36

WP3- Insurance schemes

3.1 Update of the mapping of insurance regimes in the EU-27 made in Elios 1 pilot project

3.2 Review of different mechanisms that exist to protect investors’ interests

3.3 Information needs about construction insurance

3.4 State of the art of insurance schemes in the EU-27 and transition paths

3.5 Analysis of conditions for greater mutual recognition of construction insurance regimes

3.6 Recommendations for policy formulation

90 %

90 %

85 %

80 %

90 %

85 %

11 June 2013 3

Next steps

• Integration of TSI in the Mapping• Visit of German contacts• Final recommendations

11 June 2013 4

Update of the mapping

• Significant modifications for:– Croatia– Austria– Netherlands– Norway– Spain

11 June 2014 5

Significant modifications

Other Member States

Update of the mapping

11 June 2013 6

Recommendations

• Two main categories of recommendations for improving the accessibility to construction insurance:– Improving the access process to the existing

“construction systems”– Modifying the “construction systems”

themselves

11 June 2014 7

Improving the access process

Insurance

Technology

Culture

Wealth

Userpractices

Environmental conditions

Legal framework

Markets

Insurance

Technology

Culture

Markets

Userpractices

Environmental conditions

Wealth

Legal framework

System Configuration Country A

System Configuration Country B

11 June 2013 8

Improving the access process- through transnational communication

• By increasing the insurance offer*:– Improve failure forecast of innovative technologies through

information sharing (EQEO) + Hazard notification procedure– Improve risk assessment through Quality Signs information

sharing (WP1) + Improve “relevancy” of existing quality signs (e.g. extension of ETA toward climatic conditions or installation considerations)

– Harmonize TIS accreditation / recognition by insurers– Promote a European IDI cover

(*) to accompany a contractor abroad or to meet a foreign request

11 June 2013 9

Improving the access process- through transnational communication

• By facilitating the subscribing procedures:– Add to the existing Points of Single Contact sites a specific

standardized* “construction insurance access” administrative procedure guide

– Add Elios mappings to the PSCs– Require their Update by the Member States– Add to PSCs a national complaint submission procedure– Add to Solvit an EU level complaint submission procedure,

transmitted to an European construction insurance ombudsman

(*) language, fields, format …

11 June 2014 10

Improving the access process- through international communication

Proposal Pros Cons

EQEO • Real current lack of information exchange

• Should clarify real problems / usefulness of information

• Available information from public sources only

• Confidentiality• Financing

Hazard notification procedure

• Efficient (if carried out as proposed)

• Implementation

Quality Signs Database • Real current lack of information

• Usefulness for insurers

• Based on a voluntary contribution

• Absence of gradingImprove quality signs • Improvement of relevancy

/ usefulness for insurers• Calls into question

current approach• In-depth / long-term

work

11 June 2014 11

Improving the access process- through international communication

Proposal Pros Cons

EU TIS accreditation • Harmonization of TIS to support insurance

• Made by whom for whom?

Promote an EU IDI • EU Members benchmarking of consumer protection

• Difficulty to reach / inform owners

Proposal Pros Cons

Access Procedure Guide

• Pragmatic solution to accessibility difficulties

• Rectifies current situation

• Effectiveness of enforcement / implementation

Add Elios mapping to PSCs

• Concentration of the information

• Difficulty to reach / inform owners

11 June 2014 12

Improving the access process- through international communication

Proposal Pros Cons

Update of mapping by Member States

• Quality of information• Update cost transfer

• Effectiveness of enforcement

PSCs Complaint submission procedure

• Objectivation / Realization of accessibility problems by governments

• None

Solvit Complaint submission procedure

• Ease of use• Standardization of

feedback sources

• None

EU level Ombudsman • Allow to find real pragmatic solutions to accessibility difficulties

• New expense for EU

11 June 2014 13

Modifying the “construction systems”

Insurance

Technology

Culture

Wealth

Userpractices

Environmental conditions

Legal framework

Markets

Insurance

Technology

Culture

Markets

Userpractices

Environmental conditions

Wealth

Legal framework

System Configuration Country A

System Configuration Country B

11 June 2014 14

Modifying the “construction systems” Current level of guaranties*

Level of protection

Non consequential Financial Loss

Consequential Financial Loss

Whole building

Thirdparties

Thirdparties

Non consequential Financial Loss

Consequential Financial Loss

Whole Building

Damage to the work itself

Start of Work Handover + 10 years

(*) of contractors, architects, engineers, inspectors

11 June 2014 15

Modifying the “construction systems” Desired level of guaranties*

Level of protection

Non consequential Financial Loss

Consequential Financial Loss

Whole building

Thirdparties

Thirdparties

Non consequential Financial Loss

Consequential Financial Loss

Whole Building

Damage to the work itself

Start of Work Handover + 10 years

(*) of contractors, architects, engineering firms, inspectors

11 June 2013 16

Modifying the ”construction systems”

• By setting new regulation:– Require from all EU Members a common minimum level

of guarantee* on solidity / stability of the contractors, architects, engineers and inspectors’ liability (construction work value for contractors, percentage of the Total Construction Value for “designers”)

– Include in the Freedom to Provide Service the obligation to satisfy the “host Member” State’s regulation instead of the “home Member” which leads to an insurance race to the bottom

(*) whether contractual or legal; and of property or liability type

11 June 2014 17

Modifying the “construction systems”- by setting new regulation

Proposal Pros Cons

Set a minimum level of guarantee for contractors and designers

• Reduces the gap between countries, hence facilitates transnational activity for both firms and insurers

• Increases the protection of consumers

• The guarantee has to be fitted to widely different national systems (legislation, regulation …)

• Resistance to harmonization

Modify Freedom to Provide Service law from “home state” law to “host state” law compliance

• Stop of this unfair competition which leads to a race to the bottom in consumer protection

• None

11 June 2013 18

Energy Performance Guarantees

• Review:– Huge hurdles to insure individual houses and dwellings:

• Dependency on consumer’s behaviour• Separation of appliances vs building consumption (inherent

performance of the building)• Need of equipment maintenance (ventilation)

• Recommendations:– Standardise the conventional performance definition

and calculation– Promote electrical installation which permits “inherent

performance” measurement

11 June 2014 19

Debate

• What are the hurdles to the adoption of harmonised minimum guarantees?

• Therefore, is transnational communication the only path toward harmonisation?